It's based in part on the Defense Production Act of 1950, which mobilized America for the Korean War. Basically that law granted the Executive branch of government broad authority in the economy: to compel businesses to sign contracts to produce goods for the national defense, to set wage and price controls, especially on raw materials, and to even requisition property that might be useful for national defense.

The Act has been reauthorized and passed through Congress many times, most recently in 2008 by President Bush, who had previously re-authorized it in 2003. President Clinton did the same in 1994.

Sec. 201. Priorities and Allocations Authorities. (a) The authority of the President conferred by section 101 of the Act, 50 U.S.C. App. 2071, to require acceptance and priority performance of contracts or orders (other than contracts of employment) to promote the national defense over performance of any other contracts or orders, and to allocate materials, services, and facilities as deemed necessary or appropriate to promote the national defense, is delegated to the following agency heads: